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What is Uncle Sam doing with your tax money?

May 14, 2014 — Sam H. Fawaz

Now that your tax money is in the hands of Uncle Sam, what will he do with it? How will the government allocate your contribution to the overall budget?

Your Social Security payments are easy; they go to pay Social Security benefits to current retirees, and for now (the future is another matter), they fully fund that obligation. Some of that money also goes to cover a portion of Medicare’s expenses; the remainder is covered by general federal revenue.

Your income taxes are divided among several broad budgetary categories. A surprisingly large chunk is spent on the military (27%) and military-related veteran’s benefits (5.1%). Another 22.7% goes to various forms of healthcare for U.S. residents, including the rest of the Medicare bill plus Medicaid. 13.9% of your tax money goes to pay interest on Uncle Sam’s debt–paid out to Treasury bill and bond holders every six months. Unemployment benefits take up another 9.8%.

In the “Everything Else” category on the government spending pie chart, a surprisingly low 4.5% is spent on running the government, including various agencies such as the FBI and immigration services. A total of 4% goes to housing programs, community development and block grants, while education gets a 2% slice of the pie–for programs like Head Start, and also the Pell Grants for college students. Less than 2% is spent on scientific research, international affairs, transportation and energy.

If you’d like to get a receipt from the government for your taxes paid, which itemizes how that money is spent, well, good luck petitioning the IRS. But you can get a fairly accurate receipt from the National Priorities Project here: http://nationalpriorities.org/interactive-data/taxday/. Just type in this year’s tax payment from your 1040, find your state, click a button and you’ll see what you paid for in terms of government services, interest and overhead. Depending on how you feel about our government spending priorities, it may make your tax experience more or less painful.

If you have any questions about how to plan to pay less in taxes through tax and financial planning, please don’t hesitate to contact or visit us at www.ydfs.com.